Regulatory Relief in 01? Thanks, But No Thanks

WASHINGTON  Like kids on Christmas morning unwrapping a package containing socks, bankers will force smiles and say thank you if the House Financial Services Committee passes a regulatory relief bill this year.

Committee Chairman Rep. Michael G. Oxley, R-Ohio, is thinking about rushing a bill through this fall, and committee staffers have been soliciting ideas from both the industry and regulators about what it ought to contain.

Though few bank or trade group lobbyists are willing to go on the record looking this prospective gift horse in the mouth, some say privately that regulatory relief is not a high priority. Others are concerned that the legislation could start as a collection of minor changes to various existing laws, but become a magnet for amendments opposed by financial services companies.

Over the past 10 years or so we really have been chipping away at the regulatory burden, a lobbyist said. Banks would have difficulty coming up with a specific regulation that they find particularly burdensome. Are we going to say No, thanks? Of course not. We appreciate anything Congress is willing to do in this area. But it is just not something that bankers are talking about these days.

What industry officials fear now, he said, are some of the bigger reforms like getting bankruptcy reform enacted, and certainly deposit insurance relief.

However, skeptics worry that Rep. Oxley is readying a peace offering in case lawmakers let the industry down on these priority issues, or that a regulatory relief bill could be an excuse for inaction.

The lobbyist said lawmakers may feel the pressure is off to do something on some of the more cosmic issues. That would be our concern. The best of all worlds would be to wrap everything into one bill.

Most observers warned that if Congress starts working to change laws already on the books, it should weigh the good and bad carefully.

Gilbert T. Schwartz, a partner with the Washington firm Schwartz & Ballen, said that any time Congress fiddles with current laws, it subjects them up to amendments that can boomerang.

There is always a danger in opening up existing legislation because you start getting a cutback in other powers, he said. If you open up the Bank Holding Company Act, the real estate brokers could say, Lets resolve this issue as to whether financial holding companies can be involved in real estate brokerage. And Congress might say no.

In the end, he said, banks could get minor benefits in terms of administrative issues but find that what had already won had been exposed to paring back.

Others took a more hopeful view.

L. Richard Fischer, a partner with the law firm Morrison & Foerster here, agreed that for small gains, a regulatory relief bill is probably not worth the risk. If you are thinking about isolated relief through modification of individual laws, I think financial institutions have found that the price is too great, because [Congress] loads it down with more regulation and it is counterproductive.

But that doesnt mean regulatory relief is not a good idea to pursue. Most people are thinking about it too narrowly.

Mr. Fischer encouraged Congress to focus on, among other things, removing some of the regulatory barriers to Internet financial services.

Chuck Muckenfuss, a partner with the law firm Gibson, Dunn & Crutcher, also in Washington, said the argument against adverse amendments works both ways. While the industry may not want to seek small gains at the risk of big problems, if a bill it opposes begins to gather momentum, it wouldnt hurt bankers to have a few amendments of their own at the ready.

They may not want to be the ones pushing the train, he said, but its a good idea to have some boxcars to add on if one starts moving.

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